New Nuclear Plant Projects Stalled by Market Forces

By MATTHEW L. WALDTHE NEW YORK TIMES

Tuesday

Feb 8, 2011 at 10:58 PM

WASHINGTON | In his State of the Union address, President Barack Obama proposed giving the nuclear construction business a type of help it has never had, a role in a quota for clean energy. But recent setbacks in a hoped-for "nuclear renaissance" raise questions about how much of a role nuclear power can play.

Of four reactor projects identified by the Energy Department in 2009 as the most likely candidates for federal loan guarantees, only two are moving forward. At a third, in Calvert Cliffs, Md., there has been no public sign of progress since the lead partner withdrew in October and the other partner said it would seek a replacement.

And at the fourth, in Texas, a would-be builder has been driven to try something never done before in nuclear construction: finding a buyer for the electricity before the concrete is even poured. Customers are not rushing forward, given the market is awash in generating capacity and an alternative fuel, natural gas, is currently cheap.

"The short answer is, there has to be a market for the power," said John Reed, an investment banker who specializes in nuclear projects. "That's the most immediate hurdle these projects have to get over."

(Both Florida Progress and Florida Power & Light operate nuclear plants in this state and have plans for new ones. But, like others around the country, those additions remain stalled.)There is a fairly sturdy political consensus in favor of building more reactors. By including nuclear power in a proposed "clean energy standard" shifting the electric system away from conventional coal and gas, whose emissions contribute to global warming, the Obama administration is seeking to stoke such support.

Many Democrats and most Republicans in Congress back nuclear construction, as do local officials in most places where reactors have been proposed.

Sen. Lamar Alexander, R-Tenn., and one of the Senate's strongest proponents of nuclear power, suggests Obama should make building 100 reactors in the next 20 years a national priority, both for energy security and to limit climate-changing emissions.

But for now, he acknowledges, the economics are not in place. "Right now, it's stuck," he said of the planned nuclear revival.

To counter the uncertainties, Alexander and others have arranged substantial help for the industry.

The Nuclear Regulatory Commission has been working for more than 15 years to streamline reactor licensing to cut construction time and to reduce risk. And the 2005 Energy Policy Act provided money for loan guarantees, subsidies for production from the first few reactors and insurance against regulatory delays.

Industry executives say with those changes and the financial help, they had what they needed to build after a gap of three decades. By 2008, the NRC had 15 applications for new nuclear plants in hand and expected 15 more, and it asked Congress for budget increases for personnel to handle the flood.

Across from commission headquarters, in Rockville, Md., workers are now digging a foundation for a $131 million, 14-story office tower for 1,500 employees to handle an anticipated flood of applications. But many of the proposed reactors are fading.

The four projects identified by the Energy Department after the 2005 act as the strongest candidates to share a $18.5 billion pool of loan guarantee money underline the difficulties.At the Southern Co.'s Vogtle 3 and 4 reactors, near Augusta, Ga., two holes that are each as big as five football fields have been dug for the foundations, and the NRC is expected to grant a license to build and operate the plants this year.

But negotiations on the Calvert Cliffs 3 project in Maryland broke down over what fee the builders should pay to the federal government to compensate the Treasury for the risk it was underwriting. One partner, Constellation Energy of Baltimore, gave up, and the other, Electricite de France, has not found a new investor.

Preliminary work has begun at another site, the Virgil C. Summer 2 and 3 project of South Carolina Electric and Gas, although one of the partners, Santee Cooper, is looking for another company to take over some of its share.

The fate of the fourth, the South Texas Project 3 and 4, has been uncertain since CPS Energy, the municipal utility that serves San Antonio, was spooked by rising cost estimates and decided to bail out. CPS settled with the other partner, NRG of Princeton, for 7.6 percent ownership in exchange for the money it had already invested; for months, NRG has been shopping for partners to replace CPS.

South Texas 3 and 4 and Calvert Cliffs 3 were supposed to help break a 30-year drought and get the ball rolling for construction of dozens of new reactors.

Prospects for weaker ones are fading. In Florida, Progress Energy and Florida Power and Light each wanted to build twin-unit reactors but backed off after the state Public Service Commission ruled last year that the companies could not bill ratepayers for the plants while they were being built.

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